Salt Lending, the Ethereum based platform that aims to provide crypto asset backed loans to the public, has completed its ICO. Its native SALT tokens are now available on the market and on several exchanges, including the popular ShapeShift.
The Salt platform is among the first of its kind, allowing holders of cryptocurrency (BTC, XRP and ETH at the moment) to get cash loans (USD, EUR, or RMB) in exchange for putting up their assets as collateral.
When loans are repaid in full, the borrower gets all of their collateral back. If the borrower fails to repay the loan, some or all of their assets are forfeited and the debt is considered repaid.
The Salt Lending Process
Salt does not rely on traditional credit risk assessment models such as FICO. Instead, it relies solely on the deposited collateral to determine the amount that can be loaned out.
In order to qualify for a loan one must, according to their official site “… have at least one membership token, own an asset on a blockchain and meet our eligibility requirements.” However the mentioned eligibility requirements do not seem to be specified.
The main selling point of the platform is that if a potential borrower suddenly faces a need for cash, normally they would need to sell their digital assets and potentially risk losing large profits from a rise in price.
The example they give is the massive growth bitcoin experienced between 2016 and 2017. If a person were to have sold their BTC in 2016 and rebought later in 2017, they would have lost a drastic amount of value due to the sharp increase in bitcoin’s valuation.
Instead, if one were to have borrowed the money against their bitcoin, they could have gotten the cash they needed quickly. Not only that, but they could have kept their bitcoin and its massively increased value.
What’s the Correct Value of SALT Tokens?
SALT tokens, the ERC20 based native cryptocurrency of the Ethereum platform, are used to purchase an annual membership in the platform.
Membership grants potential borrowers access to Salt loans. During the ICO, the company stated that tokens sold would be at a discount, and were valued at between $3.00 USD and $7.50, or a 70 percent to 25 percent discount, respectively. The earlier the phase of the ICO, the higher the discount.
After the ICO promotional period, the company suggested that Salt tokens would be valued at the full price of $10 each. According to Coincap, however, the tokens are currently selling well below even the supposed full price at just $3.50 or so at press time.
Some users on Reddit have speculated that early ICO contributors are dumping the token en masse for a quick, small profit, leading to the massive dip in price. Other theories include the recent downward trend most altcoins are seeing due to the attention that another potentially profitable Bitcoin fork is garnering. Finally, it may simply be that Salt misjudged the comparative value in the platform that the crypto community is willing to support at this point in the platform’s life cycle.
Pricing will likely stabilize as the platform matures and attracts more borrowers and fiat lenders, and as the upcoming Bitcoin fork completes and the market as a whole stabilizes once more.
Blockchain Lending Alternatives
While Salt Lending is among the first of its kind in the newly forged blockchain lending space, it will soon be facing competition. The recently announced Celsius lending platform will be going online later this year, but it works on an entirely different set of principles. Where Salt relies on collateral in order to secure a loan, Celsius uses AI and machine learning in order to determine loan amounts and interest rates.
While discussing Salt on the official Celsius Telegram account, Celsius COO S. Daniel Leon commented:
“Salt is a great company. Doing good things. You will never hear me or anyone say anything bad about competition. I will say this. Market is very big. $3.2 trillion in the US alone. And yet we are also different. With Salt you can get [a loan] against your own assets. With us you can get a loan without having any assets. And with us you can actually make money by “depositing” your crypto. These are [but] the two main differences.”
While it’s difficult to say what the future holds for blockchain based loans, it’s clear that what we are seeing now is just the beginning of something that could change not only cryptocurrency, but the financial world as a whole.
Is using blockchain assets as loan collateral a good idea? Tell us what you think.
Images via Salt Lending, Pixabay, Coincap.io
This article is meant for informational purposes only. Bitsonline is not responsible for any gains or losses incurred while trading bitcoin or other tokens.